Shares in weight loss drug maker Zealand Pharma fell as much as 25% on Monday after new data on its experimental drug raised concerns about its side effects.
The Danish drugmaker said that although the drug survodutide, which it has licensed to privately held Boehringer Ingelheim, met its key goals in the latest study, 19% of patients dropped out of the study due to gastrointestinal events, compared to 2.9% for the placebo.
“Overall, we consider the safety/tolerability to be disappointing [Zealand]despite data confirming encouraging body composition/liver signals,” Barclays analysts said in a note on Monday.
The high abstinence rate, with more than 40% of patients reporting vomiting, could limit the drug’s commercial potential as a treatment for obesity or those suffering from fatty liver disease, analysts added.
Shares in Zealand Pharma were last seen down 24.5%, firmly at the pan-European bottom. The Stoxx 600 index. It adds up to a nearly 50% year-to-date decline.
Survodutide was tested in adults living with overweight or obese adults, without type 2 diabetes, over 76 weeks. Topline data announced in April showed an average weight loss of up to 16.6% compared to 3.2% with placebo.
Citi analysts wrote in a note on Monday: “A 19% discontinuation rate due to… adverse events… is not a persistent error, and nausea, vomiting, diarrhea, and constipation at the levels reported here are above what we consider to be commercially viable. [rival drugs] tirzepatide and semaglutide.”
The full data on survodutide comes nearly three months after Zealand’s stock suffered its worst day on record when a trial of its other anti-obesity drug, petrelintide, disappointed investors with lower-than-expected weight loss figures.
More information on petrelintide disclosed on Friday provided “more details [its] the clinical profile, but little to change our view from the top in March,” Barclays said.
Petrelintide, developed by Zealand and Roche, seems to be attractive in terms of tolerance, but its effectiveness does not seem to be as strong as Eli Lilly’s amylin, eloralintide, or other incretin-based obesity treatments already available.
The market for weight loss drugs is growing
The market for weight loss drugs is currently regulated Novo Nordiskwhich sells semaglutide under the brand names Wegovy and Ozempic, and Eli Lillywhich sells tirzepatide as Zepbound and Mounjaro.
But a number of entrants are hoping to test their own anti-obesity drugs, including Zealand Pharma, which is partnering with major drugmakers. Roche and Boehringer Ingelheim, and heavy metals like Amgen again AstraZeneca.
Increasing competition has increased the pressure on companies to differentiate their products. Muscle mass preservation, oral options, obesity-related diseases, and weight management are some of the areas where companies aim to build their profitable market share.
While Novo’s Wegovy and Lilly’s Foundayo tablets are full, more players are about to enter the market, Investec analyst Jimmy Muchechetere told CNBC’s “Squawk Box Europe” on Monday.
As for Zealand Pharma, it has long called for the end of what it calls the “olympics of weight loss,” and says there is a focus on more than the percentage of weight loss achieved.
CEO Adam Steensberg told CNBC in March that he is “pretty sure” there will be a change in the industry in “tolerance,” referring to how patients can deal with side effects of drugs.
“I think a lot, soon, people are starting to realize that it’s not about that weight loss number, it’s about how you achieve that weight loss number.”
